AZ Arizona State sales tax rates
STATEWIDE SALES TAX RATE
ECONOMIC SALES THRESHOLD
Do you need to collect sales tax in Arizona?
You’ll need to collect sales tax in Arizona if you have nexus there. There are two ways that sellers can be tied to a state when it comes to nexus: physical or economic. Physical nexus means having enough tangible presence or activity in a state to merit paying sales tax in that state. Economic nexus means passing a states’ economic threshold for total revenue or the number of transactions in that state.
If you are doing business in Arizona, you’ve likely seen the term transaction privilege tax (TPT). Although commonly referred to as a sales tax, the Arizona transaction privilege tax (TPT) is actually a tax on a vendor for the privilege of doing business in the state. This tax is essentially Arizona’s version of a sales and use tax and is handled similarly to sales and use tax in other states. For the purposes of this guide, we’ll refer to it as sales tax.
Do you have physical nexus in Arizona?
Arizona considers a seller to have physical nexus if you have any of the following in the state:
- An office or place of business
- An employee present in the state for more than 2 days per year
- Goods in a warehouse
- Ownership of real or personal property
- Delivery of merchandise in Arizona in vehicles owned by the taxpayer
- Independent contractors or other representatives in Arizona for more than 2 days per year
Do you have economic nexus in Arizona?
Arizona is the first state to use a graduated approach to their economic nexus threshold, effective October 1, 2019. In 2019, it was $200,000/year in gross revenue in current or previous calendar year’s sales. The threshold for 2020 was $150,000, and $100,000 in 2021 and thereafter. According to state law, sellers who exceed the gross sales are required to register for an Arizona sales tax permit to collect transaction privilege tax (TPT) on sales that ship to Arizona and remit the sales tax to the state.
Is what you’re selling taxable?
If you’ve discovered you have sales tax nexus in Arizona, your next step is to determine if what you’re selling is taxable. The state sales tax rate in Arizona is 5.6%. To calculate the full tax rate, including the rate for local taxes.
Services in Arizona are generally not taxable. However, if the service you provide includes creating or manufacturing a product, you may have to deal with the sales tax on products.
Tangible products are taxable in Arizona, with a few exceptions. These exceptions include certain groceries, prescription medicine and medical devices, and machinery and chemicals used in research and development.
If you have sales tax nexus in Arizona and your products are taxable, your next step is to register for a sales tax permit.
The use tax in Arizona for untaxed goods purchased from out-of-state sellers is 5.6% – the same as the state sales tax rate.
Sales tax exemptions can create headaches for sellers, but the process is easier if buyers can find and complete the appropriate certificates and provide it to the seller.
Is SaaS taxable in Arizona?
SaaS is taxable in Arizona.
How to collect Sales Tax in Arizona
The sales tax rate you collect in Arizona depends on whether you are based in Arizona or out-of-state.
Arizona is an origin-based sales tax state. So if you live in Arizona, collecting sales tax is fairly easy. Collect sales tax at the tax rate where your business is located. The state sales tax rate in Arizona is 5.6%.
How to collect sales tax in Arizona if you are not based in Arizona
If you are not based in Arizona, collecting sales tax gets tricky.
Should you collect sales tax on shipping charges in Arizona?
As long as you separately state the shipping charges on your bill to your customer, you do not have to charge sales tax on shipping.
But if you include shipping in the price of the product you sell the customer, then shipping is considered part of the taxable transaction and Arizona declares that you must collect sales tax on shipping.
When are Returns Due?
When you file and pay Arizona sales tax depends on two things: your assigned filing frequency and your state’s due dates.
How often will you file sales tax returns in Arizona?
States assign you a filing frequency when you register for your sales tax permit (or, in the case of Arizona, your TPT permit). In most states, how often you file sales tax is based on the amount of sales tax you collect from buyers in the state.
In Arizona, you will be required to file and remit sales tax either monthly, quarterly or annually. Arizona electronic sales tax returns are always due the final day of the month following the reporting period. If the filing due date falls on a weekend or holiday, sales tax is generally due the next business day.